Are you ready for the Talent Crunch?

Are you ready for the Talent Crunch?

Companies are looking to hire! According to Vistage research, “The most notable finding from the December survey is that more than two thirds (67%) of small businesses reported plans to increase their workforce in the year ahead, up significantly from 55% in November. These expansion plans among small businesses are the highest since February of 2018.”

At the moment, from what I hear, finding the “right” people is hard. That is because of COVID. People will not:

  • Leave current employment. With COVID, employees are staying put for the moment as the risk of moving is too significant. Everyone is aware of a “last in, first out” bias, so no one is ready to take the risk until things improve.
  • Move. With COVID, employees are unlikely to take jobs in new cities. That is not to say people aren’t moving; they are, but usually back to where they came from, with support systems there. Baby boomers are moving to some excellent early retirement locations. However, average employees are unlikely to move for a job as there is too much risk involved in incurring up and moving expenses when the job is uncertain, and they may have no support structure.
  • Take large risks. There is enough risk right now from COVID, and the economic uncertainty that most people will not take on more for a situation that they feel is very risky.

Current expectations are that we may hit COVID herd immunity in July, with the recovery starting in May or June. If that is the case, businesses will benefit from the pent-up demand that COVID has caused. Thus, we can expect employees to adjust their risk profile and start job hunting and moving just as companies increase their employment demands from Q2 onwards.

What are the employees looking for?

Purpose. For many, COVID has brought home their mortality and causing them to ask if what they do matters. Thus, if the company has no core purpose or “Why?”, or the core purpose doesn’t align with the employees’ purpose, the employees will move to those companies where the core purpose aligns.

Empathy. Many people will feel that their employers/bosses didn’t treat them well during COVID or showed insufficient compassion. They may have had to work through challenging homeschooling or ill parents/spouse with their employer making little allowance.

Living Core Values. Many companies have claimed to have Core Values, but when they are just words on a wall. During COVID, many organizations’ behavior has shown employees that their Core Values are just words and not beliefs, and not living your core values will drive employees and prospects away.

Opportunity. Since we are all mortal and life is fleeting, not only do employees want to work where they believe in what they are doing, but they want to realize their potential. Employers that show no interest in an employee’s career development and personal requirements will find those employees departing.

Character. As a result, employees will look for those companies who have always stated their Core Purpose and Values rather than those who have suddenly “found religion” and hoping that their new statements will make a difference like a fresh coat of paint.

McKinsey research showed that of employees:

  • 82% believed it was important for the company to have a purpose;
  • 72% thought that purpose should have more weight than profit;
  • 62% believed that the company should have a purpose statement; and
  • 42% said that their organizations’ purpose statements drove impact.

So, where does your organization fall? If you don’t have a purpose statement that is driving impact, how will you fare in the looming talent crisis? As I have often said, “How you behave during this crisis will define you for a decade or more.”

Here are some questions to ponder.

  • Do you have a clear purpose?
  • Can you say in one sentence what your organization is passionate about?
  • Why does the organization exist?
  • What are your Core Values, and can you point to those that live them and where they are part of your folklore?

If you can’t answer these, then the Talent Crunch is going to hurt! People will leave for places where they feel their purposes align and people live with similar Core Values. As the economy recovers and demand picks up, most companies will need more people to meet the challenges. If you don’t have enough and cannot hire the type you need, you will be in trouble.

If you don’t have a Core Purpose or Core Values, then you are attracting three basic types of employees:

  1. Walking dead. Can’t get a job anywhere else
  2. In Transition. They need a job, so they will work for you until something better comes along.
  3. Don’t care about a Why. These people do have a Why, but it is usually money and nothing else. At any time they feel they are not getting enough, they are gone. Real mercenaries and not good if you ever expect to hit a rough patch in the future.

If you don’t understand your Why, Simon Senik’s video below will put it better than I ever could.

Remember, a Core Purpose is a deep reflection on your corporate identity—what you really stand for—which may well lead to material changes in your strategy and even your governance. If you don’t have a Core Purpose and Core Values but will start defining them now, I would offer some suggestions.

  1. Get a coach or facilitator to help. Discussions over this can easily get bogged down. Many times, everyone will look to the business owner for guidance, which may be okay. But if the business owner comes up with a bad Why, e.g., profit, will anyone challenge?

2. Don’t make profit your Why, for some of these reasons:

  • No one cares but shareholders, and generally, they are not the ones operating the business.
  • Your customers and suppliers are not impressed that “making a profit” is your Why, as that implies you will take advantage of them.
  • If profit is your why then everyone’s only interest is making money. Thus, anything that will make money is okay. When the company hits trouble, no one will stay and help; they are only there for the money.
  1. Remember Jim Collins’ statement about Core Values, “you are willing to lose money than breach your core values.” So, once you determine, make sure your leadership team and most of your employees can live them. If not, they need to go, as they are not “the right people.”

If you have an excellent Core Purpose and held Core Values, put them on your website, in your recruiting materials, and make sure you live your core values. You will be able to attract some great talent in the times ahead.

 

Copyright (c) 2021 Marc A. Borrelli

Recent Posts

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”

The Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.

Does Your Financial Model Drive Growth?

Does Your Financial Model Drive Growth?

Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...

COVID = Caught Inside

COVID = Caught Inside

As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.

Why is there not MORE common sense

Why is there not MORE common sense

“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.

Do You Understand Your Costs to Ensure Profitability?

Do You Understand Your Costs to Ensure Profitability?

You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.

Sunk Costs Are Just That, Sunk!

Sunk Costs Are Just That, Sunk!

If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.

The “Flaw of Averages” Causes Havoc for Businesses

The “Flaw of Averages” Causes Havoc for Businesses

Right out of the gate, I will admit I stole the “Flaw of Averages” from Sam Savage, whose book by that name I cannot recommend highly enough if you find this topic of interest.

What is my issue with averages? They misstate what is happening in the business and cause misallocation of resources. Let’s take a hypothetical business, ABC Inc., with the following products, units sold, unit price, and gross profit per unit. Now while this examines Products, we could easily substitute Services.

Product

Units Sold

Price/Unit

Gross Profit/Unit

A

         30,000

 $          100.00

 $       12.50

B

           7,500

 $            90.00

 $       75.00

C

         20,000

 $            80.00

 $       37.50

D

         15,000

 $            70.00

 $       45.00

E

         10,000

 $            60.00

 $       25.00

F

         25,000

 $            50.00

 $       12.50

G

         20,000

 $            40.00

 $       20.00

H

         20,000

 $            30.00

 $       25.00

I am sure that everyone can see that ABC’s revenue is $9,575,000 and its gross profit is $3,825,000, giving it a gross margin of 39.9%. Let’s assume that this gross margin is in line with the industry to not get into the cost of goods sold issues.

If we look at products in terms of revenue and sort from largest to smallest, we get the following.

Product A is the largest seller accounting for about 40% of sales. While products B, G, H, and F together account for 35% of sales, obviously less than A. So, how should we consider this product portfolio?

Examining the product portfolio, we see that A accounts for only about 10% of gross profits. Products B, G, H, and F together account for 46% of gross profits, so they are far more critical to ABC’s profitability. Furthermore, products C, D, B, H, and G are more important than the revenue chart above would indicate. While they account for about 50% of revenue, they generate 75% of gross profit and have a gross profit margin of 61%.

If ABC were to stop selling product A, its revenue and gross profit would fall by $3MM and $300k, respectively, and its gross profit margin would increase from 40% to 52%. Increasing gross profit margin by over 10% would be fantastic! Furthermore, given product A’s high cost of goods sold, we can assume that it is consuming a large amount of raw materials and labor–in other words, working capital. If ABC were to stop selling A, its working capital situation would improve, thus improving its liquidity ratios.

Also, this simplistic assumption doesn’t provide details, but there are possibly additional costs that I have not included from the production of A, namely:

  • Factory space to produce A
  • Warehouse space to store the raw materials for A and completed inventory.
  • Staff to track orders and purchases related A
  • Shipping costs of A
  • Staff overseeing the production of A

If ABC were to stop producing A, it’s Selling, General, and Administrative Expenses could fall further, boosting profitability. Thus, by looking at average margins, we don’t see Product A’s full impact on the business. Now I realize that A might be essential to getting the other products’ sales, but undoubtedly, we can increase the price of A or put together a bundle for more effective pricing.

Many years ago, when I was working at Holiday Inn, now IHG, the company was delighted with Holiday Inn Express’s launch. Holiday Inn Express franchises were selling like proverbial “hotcakes,” compared to the sale of old Holiday Inn franchises (“Green Sign” as we referred to them then). The increase in franchises was boosting distribution dramatically. However, if we look further into this and add some data (the numbers below are indicative, not actuals, to show the effect), we see it is not as straightforward.

 

Holiday Inn

Holiday Inn Express

Avg No of Rooms

120

80

Average RevPAR*

$48

$35

Franchise Fee

7%

6%

Expected Hotel Revenue ($ 000’s)

2,102

1,022

Expected Franchise Income ($ 000’s)

147.2

61.3

Franchise Support Costs ($000’s)

20.0

50.0

Estimated Profit ($000’s)

127.2

11.3

RevPAR = Revenue per Available Room = Revenue / Rooms

So, while Express hotels were selling faster, IHG needed to sell two Express hotels for each Green Sign. Also, most Express hotels buyers were independent operators who had not owned franchised hotels before if they had even held a hotel. Owners of Green Sign hotels were typically experienced hotel owners who often owned multiple properties. Due to the clients’ difference, further analysis showed that each Express owner required 2.5x the Holiday Inns’ franchise service support. Thus, while Expresses were selling like hotcakes, the profitability was far lower, and it is easy to see how the adage, “We lose money on every sale but will make it up in volume,” happens.

If we add customers to the mix makes it gets more interesting. Let’s assume ABC has the following customers, who purchase the following amounts of product.

Now, if we examine the purchase and gross profits of each customer, we get:

Customer

Revenue

Gross Profit

S

1,899,890

        869,085

T

       1,725,700

          700,983

U

       1,598,430

          414,600

V

          951,540

          491,173

W

       1,273,760

          459,958

X

          563,430

          259,640

Y

          458,530

          176,880

Z

       1,103,720

          452,683

Total

9,575,000

     3,825,000

Sorting that into the order of gross margin, we can see the following:

,Now we can see that S is our most profitable customer by a large margin, and the gross margin from its purchases is above ABC’s average. Hopefully, every company has done this analysis and know that they all want customers like S.

However, if we look across the rest of the clients, X, while not generating a lot of profit, does so at a very high margin. Y generates slightly less profit but at a margin below 20%. So, ABC wants more customers like X and fewer like Y. Also, given that our average gross margin was 40%, nearly all customers except Y, W & U are buying combinations to generate gross margins above 40%.

Therefore, this analysis shows that while ABC’s gross margin is nearly 40% and its gross profit is $3.8MM, if it were to lose customer S, sales and gross profits would fall to $7,675,110 and $3,333,828 respectively, providing a gross margin of 38.5%. However, if ABC were to lose client U, sales and gross profits would fall to $7,976,570 and $3,410,400, respectively, while gross margin would increase to 42.8%. Increasing gross margin by even 300 basis points would be significant for many companies.

As with products, we don’t see which clients to seek or replace by looking at the average gross margin. If ABC were to extend the analysis to clients that were done product A by looking at the time taken to service each client, it might find more that are not worth having.

(An old client of mine had a business doing about $4MM in revenue and generating $200k in EBITDA. His original client, say XYZ, was his largest, accounting for 40% of his sales, and it was time for the contract renewal. As we looked at it, we noticed that XYZ was like Product A, generating meager gross profit. We then analyzed what would be the impact on the business if he were to lose XYZ. My client realized he could cut his workforce by 50%, reduce his vehicle fleet by 55%, and cut energy consumption and floor space. As a result, he held firm on his proposed price increase with XYZ during the contract renewal, and XYZ refused to renew the contract. So, he cut the expenses we had identified, and the following year, his revenue fell to about $2.4MM, but his EBITDA increased to $450k.)

Finally, for company ABC, when we determine that we want to make a gross profit of “X%”, focusing on each product to ensure it meets that criteria will help. By focusing on each customer to ensure that their purchases don’t drive gross profits down, we can raise ABC’s profitability.

I hope you do this work for all your products/services and clients regularly and focus on those that improve margin and profitability. Using data properly can really help your business.

As I mentioned above, if you are interested in this area, I would recommend the following books The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty, by Sam Savage and Why Can’t You Just Give Me The Number?: An Executive’s Guide to Using Probabilistic Thinking to Manage Risk and to Make Better Decisions, by Patrick Leach.

 

Copyright (c) 2021, Marc A. Borrelli

Recent Posts

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”

The Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.

Does Your Financial Model Drive Growth?

Does Your Financial Model Drive Growth?

Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...

COVID = Caught Inside

COVID = Caught Inside

As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.

Why is there not MORE common sense

Why is there not MORE common sense

“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.

Do You Understand Your Costs to Ensure Profitability?

Do You Understand Your Costs to Ensure Profitability?

You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.

Sunk Costs Are Just That, Sunk!

Sunk Costs Are Just That, Sunk!

If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.

What is Your Strategy, In a Sentence?

What is Your Strategy, In a Sentence?

2020 was a challenging year. By March, we had thrown all of our plans away and were adjusting to a new environment. Having made it through 2020, we now have entered 2021. What awaits? From what I hear, we are going to be living with COVID for a while, regardless of the vaccine. How long who knows, but forecasts I hear are Q3 or Q4. Thus, we are in a Groundhog Day for effectively another year. So, what is your strategy for 2021 and beyond? And more importantly, do your employees clearly understand your strategy? Can they state it in a single sentence?

In discussions with many companies, and ignoring those that respond with a blank stare, I hear everything across the spectrum from “We have a detailed strategic plan” to “We don’t really have a strategy.” Often what I hear are tactics, but mostly hope. But as Dr. Akande famously said, “Hope is not a strategy.” So, I hope all of you have your strategies planned for 2021 and beyond.

If you do, I hope it is written down, because as Emmitt Smith said, “It’s only a dream until you write it down, and then it becomes a goal.” So, assuming you have your strategy, and it is written down, you need to be able to articulate it in one sentence.

Why one sentence? Because most of those that have strategies don’t provide a crisp, clear answer in a single sentence (which may be the reason so many people in organizations complain about a crisis of clarity).

Patrick Lencioni’s Four Disciplines of the Advantage are even more key today. The Four Disciplines are:

  • Discipline 1: Build a Cohesive Leadership Team
  • Discipline 2: Create Clarity
  • Discipline 3: Over-Communicate Clarity
  • Discipline 4: Reinforce Clarity

In a time with so much uncertainty, the key to success is being able to adapt quickly to market conditions and pivot where needed. However, if your employees don’t know your strategy with clarity when the environment changes, they will be seeking input from above as to how to respond. Slowing decision making increases the opportunity for you to adapt too slowly and suffer from increased losses or missing out on new opportunities.

So, a one-sentence strategy achieves Discipline 2. Furthermore, if there is clarity, then it can be easily communicated and understood. With Discipline 3, over-communicating clarity, everyone in the organization should know the strategy and state it in the same way. With clarity and focus across the organization, it is more likely that the organization can reach its goals as everyone will understand if something fits with the strategy.

In addition, it needs to be a sentence because a single sentence has real power. As Clare Booth Luce once told John F. Kennedy in 1962, “a great man is one sentence.” His leadership can be so well summed up in a single sentence that you don’t have to hear his name to know who’s being talked about. For example, “He preserved the union and freed the slaves,” doesn’t need explaining that it was Abraham Lincoln. Luce was telling Kennedy to concentrate, to know the great themes and demands of his time, and focus on them. It was good advice. When imperatives are clear and met, you get quite a sentence.

While these are legacy sentences and focus on the past, the same logic can apply to strategy, which is focused on the future. Thus, a great strategy is a sentence.

So how do you do it?

Roger Martin, in his book, Playing To Win, proposed a strategic framework based on five key questions:

  1. What is our winning aspiration?
  2. Where will we play?
  3. How will we win?
  4. What capabilities do we need?
  5. What management systems must we have?

However, to state your strategy in a sentence, you just need to focus on the first three questions: winning aspiration, where to play, and how to win. With that structure, you get the format:

Achieve [Winning Aspiration] in [Where to Play] by [How to Win].

Breaking it down:

  • Winning Aspiration. The winning aspiration needs to describe a clear win that is future-oriented, ambitious, specific (thus measurable), contains a competitive element, and avoids a play-to-play goal.
  • Where to Play. The Where to Play needs some element of market segmentation, you satisfy the entire market.
  • How to Win. The How to Win needs to capture your organization’s unique and defensible value proposition and your competitive advantage.

Here are some examples:

  • We want to lead the U.S. luxury performance sedan segment by offering higher quality and competitive design for one-third less.
  • We want to have a top-ranked 5-star property in every market that will support a luxury hotel by providing a home-away-from-home, office-away-from-office experience.
  • We want to capture the short-haul air travel market with high-frequency flights and efficient service to secondary airports at a price that rivals driving.

Hopefully, you didn’t need to be told “Lexus,” “Four Seasons,” or “Southwest Airlines.”

So, get with your leadership team and develop your one-sentence strategy. Once you have all agreed on it, ensure it has clarity. Then, as Lencioni says, over-communicate it to your firm, customers, suppliers, etc. With everyone focused on the same goal, you are more likely to achieve it!

 

Copyright (c) 2021, Marc A. Borrelli

 

Recent Posts

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”

The Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.

Does Your Financial Model Drive Growth?

Does Your Financial Model Drive Growth?

Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...

COVID = Caught Inside

COVID = Caught Inside

As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.

Why is there not MORE common sense

Why is there not MORE common sense

“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.

Do You Understand Your Costs to Ensure Profitability?

Do You Understand Your Costs to Ensure Profitability?

You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.

Sunk Costs Are Just That, Sunk!

Sunk Costs Are Just That, Sunk!

If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.

Character Matters

Character Matters

Core Values

I have often written about the importance of a company’s Core Purpose and its Core Values. The organization’s Core Purpose is why it exists and gives everyone an understanding of what it does. The company’s Core Values explain how the company expects its employees to behave. The purpose of these is to align behavior across the organization and thus produce better results. In many cases, the Core Values are short and need corporate folklore around them to provide context. However, given the organization’s Core Purpose and Core Values, most people should determine how to respond to a situation that works in the organization’s best interests.

As Jim Collins says, you would take a hit to profits to ensure you live up to your Core Values. Thus, there are no outs from Core Values. That is the way the organization behaves, and there are no exceptions. Because of this strictness, I genuinely believe that Core Values need to be framed by folklore and corporate history to give them context. Humans relate to stories, so stories of why these values are essential and how we should interpret them will enable your employees to understand and adopt them quicker.

 

Instilling Core Values into the Organization

When recruiting employees, it is useful to look at their prior employer. If the organization they worked for before had very different Core Values, they are unlikely to fit within your organization and add value. For example, if their prior employer was Stratton Oakmont and one of your Core Values is to treat customers with respect, they are probably not worth interviewing. Most recently, Forbes has published a piece, “A Truth Reckoning: Why We’re Holding Those Who Lied for Trump Accountable,” where they argue that those who lied should not be hired, and if any company does hire them, Forbes will assume everything the company talks about is a lie. It will verify everything they say on the assumption it is a lie.

How someone behaves tells you and their subordinates what matters to them and what you expect from them. We all have baggage, and in the wonderful world of LinkedIn, Glassdoor, and general industry incestuousness, it is easy to find someone’s prior behavior with a little digging. Thus, I find it interesting when I hear someone say with shock, “I never expected them to behave this way,” and it is a behavior pattern the person has always exhibited.

There many ways of setting up situations to observe the potential employee’s true colors. We know how Zappos! checked candidates for behavior from how they treat the “driver” who picked them up from the airport. Other companies have, pre-COVID, taken candidates to lunch and had the wait staff bring them the wrong order to see how they dealt with it.

The most important thing for the organization is to ensure that its employees live its Core Values daily. The challenge for many organizations is how to instill Core Values into employees and reinforce them. Below are examples of how companies achieve this.

  • One organization has new employees spend their first week solely focused on learning and understanding its core values from its folklore through discussions with many of their colleagues. At the end of the week, the new employee meets with the CEO and discusses the company’s Core Values, and the CEO seeks to ensure that they genuinely understand the Core Values and what is expected of them; if not, they are let go. The CEO’s justification for having employees do nothing else during that first week is that it is the best time to learn and absorb the Core Values. As Core Values guide their behavior, the longer an employee takes to understand them, the greater the chance that they behave in ways that are contradictory to the Core Values. Such action could potentially damage the company’s relations with customers or suppliers and damage the employee’s relationship with their coworkers.
  • Cambridge Air Solutions provides all new employees with a vest to identify them as such, and all employees are responsible for helping the new employee learn the Core Values. Because new employees are easily recognized during their onboarding process, they receive encouragement and support from other employees. Those employees are then more willing to help other new employees who come after them. Thus, the process reinforces itself and ensures that desired behaviors become ingrained.

Living Core Values

However, regardless of your onboarding process, the CEO, management team, and employees need to continually focus on living the organization’s Core Values and make them Actions to Live By. Many organizations have different ways of doing this. Some are like ReStockIt, which has an icon for each Core Value. Employees can award any other employee an icon for following exhibiting a Core Value. This behavior reinforces living Core Values among the employees. Others allow employees to call each other out for not displaying a Core Value in a situation. In my work, I have found it interesting that CEOs, when facing a dilemma, rarely frame it within their Core Values to see how they should proceed. Doing that often provides an easy answer to the problem.

The iconic investment bank, Goldman Sachs, has had its reputation a little tarnished over the last decade or so for defrauding clients in the Global Financial Crisis and more recently the IMDB scandal. Thus, I have often wondered if I am Goldman’s client, what is more important to Goldman, me or them. Well, obviously it is Goldman, as has been recently demonstrated with WeWork, where they were a lead underwriter of a worthless company. More recently Goldman’s CEO, David Solomon, expressed concern about market euphoria driven by small investors buying IPOs. While expressing concern, Goldman is taking Robinhood public, which gamifies stock investing and is damaging to its supposed clients, resulting in financial loss and suicide. I use “supposed” because as with all things that are free, the client is not the client but the product. Obviously making money is Goldman’s Core Value, and whether or not it is damaging to anyone else is irrelevant.

In discussing Core Values, I often ask, “What are the top five things, non-criminal, that would get you fired in this organization?” The answers to this question are the opposite of your Core Values. If you have a Core Value of “Treat everyone with respect,” and none of the answers says you would be fired for disrespecting someone, then that is not a Core Value. Regularly doing this exercise is eye-opening for many CEOs. While companies have Core Values and post them everywhere, they just become words rather than actions to live by.

 

From the Top Down

While corporate Core Values are essential, the organization’s behavior is purely a summation of the individual leaders’ Core Values. Thus, it is the behavior of the business leader or CEO that is key. I remember sitting in a meeting with the late Robert Maxwell, where his solicitor acknowledged the contents of an off the record conversation with our solicitor. Maxwell turned to his solicitor and said, “You will unsay whatever it is you said.” That statement told you everything you need to know about Maxwell’s Core Values, and thus it was no surprise that a year or so later, we learned that Maxwell had stolen his company’s pension funds.

In my career, I have left companies because of behaviors I saw that didn’t fit with my Core Values. Seeing a CEO verbally abuse a janitor or someone at a low level who had no responsibility for the situation told me enough about their character. Reflecting on those decisions now, I realize that I would have made a lot more money staying, but at what cost to my values. For me, the price was always too high. As I have mentioned before, from what I saw of Robert Maxwell, I could never have worked for the Mirror Group or any of his other organizations.

If someone starts to behave against your Core Values, as, with any abusive relationship, my advice is to run, don’t walk. They are unlikely to change, and the internal stress you will face from working in such an environment will take a terrible toll on your body. An ex-colleague of mine collapsed and was sick for a week after a business trip with an abusive boss.

Furthermore, if you have someone in your organization that is abusive in some fashion, those that can leave will. Those who don’t, have no alternatives or know that they are overpaid and stay for the money. Neither is good for the long-run health of the firm.

 

Tolerating Bad Behavior

However, too often, I hear business leaders making excuses for a member of a team who does not live their Core Values, saying, “They are too important” or “They are our top salesperson.” While this may be true, giving someone a pass weakens the Values’ importance and tells everyone that they are unimportant. 

It is recognized that the main reason top employees leave an organization is that management tolerates mediocre talent. If the Core Values are Core Values, then accepting someone who doesn’t live then is tolerating mediocre talent, and you will lose your best employees who do believe in your Core Values.

If you are willing to tolerate a top salesperson breaching your Core Values, the message that you are sending to your organization is, “Money is our Core Value.” As a result, you can expect everyone in the company to undertake whatever is necessary to make money, regardless of what your “Core Values.” No, please understand me, if money is your driver, I don’t believe that is wrong; it is what it is. However, once you have decided that money is your driving value, it is hard to claim you have others. The reason is that with Profit/Money as a Core Value, it will override any value because that is what is valued. If your Core Value is respect, but if I disrespect an employee to get a large order, respect can never rise above money. Also, I have noticed that those companies for which money or profit is the driving value always have little employee commitment because it attracts employees who believe the same thing. They will always leave for more money. Finally, most companies and people with money as their Core Values don’t have great endings, and we only have to look at Enron, WorldCom, Bernie Madoff, and Bear Stearns for examples.

 

Working with Others

However, living your core values must cover all your actions. If you have a customer that is poorly treating an employee and your Core Value is respect, you need to either get the customer to change or terminate the relationship. Again, Core Values are things we would protect over profit and while losing a customer is never easy, the message of doing so would do wonders for your team. A client of mine had a client who was abusing one of their managers to the point that the manager told his CEO that he would resign because he could no longer take it. The CEO raised the issue with me, and I pointed to one of his Core Values, which was, “A supportive environment to help all employees be their best.” It wasn’t hard to see what the decision needed to be. As in most cases, when my client contacted the client’s CEO to tell him that they were terminating the relationship, their client insisted they stay and terminated their bad behaving employee.

However, with Core Values, it is not just your employees, customers, and suppliers. Today many millennials are interested in what you represent, and they are looking at the whole picture. Thus, many are caught in a difficult situation for not doing enough due diligence or, when things go wrong, are thrown to the wolves. Many people get caught up on the wrong side of an issue because they didn’t think it through. Les Wexner sought to distance himself from Jeffery Epstein as fast as possible by claiming theft. Wexner’s saving grace was that Epstein took his own life. Still, if one looks at their relationship, it began in the 1980s. While there was an effort to distance from Epstein eighteen months after his charges in 2006, in 2019, Wexner stated that Epstein had been misappropriating funds from the Wexner Foundation. It would appear that money was Wexner’s motivation, and so he overlooked Epstein’s character. Unfortunately, this seems to be his MO as his property appears to be part of the Ohio State wrestling sex abuse scandal. 

Roger Ailes’ sexual harassment at Fox News shone a light on that organization’s values, which openly accepted sexual harassment. Although initially denied, accusations against Ed Henry, Tucker Carlson, and Sean Hannity of sexual harassment and disclosure that Fox News had paid tens of millions to settle six such claims against Bill O’Reilly were evident sexual harassment was happily tolerated at Fox News. In O’Reilly’s case, sixty companies withdrew their advertising when news of the settlements became known, causing the company to terminate his show. While Ailes and O’Reilly left Fox News, Ailes continued to advise the Murdochs until his death. Given the Murdoch’s acceptance of his values, he revealed his own, so it is apparent why sexual harassment was such an issue at Fox. As younger consumers accept BLM and the #MeToo movement, companies and their executives will have to ensure they live their Core Values.

Finally, we might see a backlash against companies using NDA and settlements to shut down any knowledge of breaches lousy behavior. In my opinion, that alone confirms that the organization doesn’t adhere to any Core Values that it would like publicized.

 

 

Time to Take a Stand

The last 13 months have been a test for many with COVID, BLM, MeToo, and the attack on the Capital last week. What has saddened me the most is how few CEOs have stood up and taken a stand. I have always accepted that politicians are not brave and follow the crowd, but with CEOs and their cry for authority at the highest levels, they cannot be silent. While CEOs are risk-averse and would argue that they want to put their heads above the parapet as they have to protect their business, the counter-argument is if you’re going to lead, lead, and do it by example. You want the “big bucks” and prestige of being a CEO, well, with all that glory and reward, there is a price, and you don’t get to claim ignorance. 

I have repeatedly said that how you have acted in the last twelve months will define your career for the next decade. Many are finding that lesson harrowing today. Cognitive dissonance and justifying away all the breaches of your supposed Core Values for profit or business relations has shown everyone what is essential, rather than what you claim. 

While it is easy for me to judge, many argue that these things are on a spectrum and are not so cut and dry. I would point you to Clayton Christiansen’s great Harvard Business Review article, How Will You Measure Your Life, where he addresses Avoiding the Marginal Cost Mistake. 

“We’re taught in finance and economics that in evaluating alternative investments, we should ignore sunk and fixed costs, and instead base decisions on the marginal costs and marginal revenues that each alternative entails. … If we knew the future would be exactly the same as the past, that approach would be fine. But if the future’s different—and it almost always is—then it’s the wrong thing to do.

This theory addresses the third question I discuss with my students—how to live a life of integrity (stay out of jail). Unconsciously, we often employ the marginal cost doctrine in our personal lives when we choose between right and wrong. A voice in our head says, “Look, I know that as a general rule, most people shouldn’t do this. But in this particular extenuating circumstance, just this once, it’s OK.” The marginal cost of doing something wrong “just this once” always seems alluringly low. It suckers you in, and you don’t ever look at where that path ultimately is headed and at the full costs that the choice entails. Justification for infidelity and dishonesty in all their manifestations lies in the marginal cost economics of “just this once.”

The lesson I learned from this is that it’s easier to hold to your principles 100% of the time than it is to hold to them 98% of the time. If you give in to “just this once,” based on a marginal cost analysis, as some of my former classmates have done, you’ll regret where you end up. You’ve got to define for yourself what you stand for and draw the line in a safe place.”

Another way is to start with the worst-case and work back. Taking Jeffrey Epstein as an example, work from the worst outcome to the best and determine where on the spectrum you would find it acceptable, knowing everything you know now. I would hope everyone would say that they would not like any association with him at any level. If that is the case, then we need to be like that with all our relationships and ask how they reflect on our Core Values.

Talking about someone that I find to be abhorrent, one of their supporters said, “But his friends say he is wonderful, kind, and charming.” My response, “So did Heinrich Himmler’s, so I don’t find that a valid qualifier.”

An exercise that I do with my Vistage Groups, and I know many others do, is ask people to write their obituary as they would like to see it. Once you have done that, look at your actions and relationship today and ask, “Are there relationships and actions ones that I would be proud of when my obituary is written.” It is all too easy to justify ignorance to ourselves. However, imagine being questioned in a courtroom with your family and best friends in the spectators’ section, and you are asked how you never saw all the bad behaviors as they are laid out in front of you. While you may justify it, will your friends and family look at you in the same way again? I would hate for any of you to be a Lt. Col. Matthew Andrew Markinson.

Be brave and live your Core Values, whatever they may be, because character matters at the end of the day.

 

Copyright (c) 2021, Marc A Borrelli

Recent Posts

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”

The Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.

Does Your Financial Model Drive Growth?

Does Your Financial Model Drive Growth?

Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...

COVID = Caught Inside

COVID = Caught Inside

As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.

Why is there not MORE common sense

Why is there not MORE common sense

“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.

Do You Understand Your Costs to Ensure Profitability?

Do You Understand Your Costs to Ensure Profitability?

You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.

Sunk Costs Are Just That, Sunk!

Sunk Costs Are Just That, Sunk!

If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.

New Year’s Resolutions, Once More Unto the Breach

New Year’s Resolutions, Once More Unto the Breach

Well, another New Year has come, and once more time for New Year’s Resolutions. Looking at my resolutions for 2020, as I plan for 2021, I was pretty pleased with myself. The goals I missed out on were volunteering and being more social, both of which were hard in a COVID world. However, as I contemplated my resolutions for 2021, a conversation came to mind.

Five years ago, at a friend’s 50th birthday party, one of the other participants said, “I have 20 summers left, and I am not wasting another one.” We all looked in shock at him and asked if he was ill. “No,” was his response. “I am 50, and I believe that until I am 70, I can do pretty much anything I want, but after that, who knows. So, I have twenty summers left, and that is not a lot, so I don’t wish to waste them.” While that conversation resonated with me at the time, COVID-19, the death of a friend, and close two friends having severe illnesses at the end of this year, just brought home that I am heading towards the next chapter in my life, and I need to plan for it. Thus, I took a different approach to my resolutions this year and applied standard business planning processes.

So, what have I done? Well, I started by determining who the best me is. With that in mind, I returned to Jack Cranfield’s ideas and developed a list of affirmations that I wish to live with that will make me the best me. With my affirmations in place, I then created a set of core values that I want to apply to my personal and business life. There are rules that I am going to process my decision making through.

 

The BHAG

I have developed a BHAG with my best self in mind with that framework. While my personal BHAG is longer than a traditional business one, it needs to include my business, personal, and relationship desires. As a result, it is “Is to have successfully retired in Costa Brava in Spain and Atlanta, with sufficient investments to allow me to continue my lifestyle while ensuring that my children are established in their desired careers.”

So, with that BHAG, let’s clarify it in more detail. I expect to retire somewhere between 2032 and 2037 (70 to 75), so by that time, I need to have:

  • Purchased a house on the Costa Brava;
  • Invested enough to meet our lifestyle needs living in two places;
  • Invested sufficient to pay for regular travel;
  • Become conversationally proficient in Spanish;
  • Developed outside interests to keep me occupied in retirement;
  • Maintained a level of weight, strength, and fitness to be able to enjoy my retirement; and
  • I have helped my children complete college and graduate school and get into their chosen professions.

Digging into this BHAG, it has business, personal, and relationship requirements.

The Business requirement is earning over $200k+ net income per year from now until retirement to purchase a home in Spain, resulting in sufficient invested assets to maintain our lifestyle. To achieve this, my business goal is to be a leading business coach in the Atlanta area for companies looking to “Scale without Fail” with revenues between $10MM and $200MM.

The Personal requirement has several components.

  • To be proficient in Spanish will require studying and practicing Spanish for the next 10+ years and probably need one or two immersion programs.
  • To maintain my weight, strength, and fitness will require losing an additional 10lbs and doing a little more strength and fitness training weekly as I would like to at least a hike/walk of 7+ days once a year and snow ski a week a year.
  • To develop interests to keep me occupied in retirement is to keep reading 30 books a year and look at the possibility of doing an online MA degree during retirement to keep my mind active.

The Relationship requirement also has several components.

  • Successful retirement will require a robust, loving, happy, and supportive relationship with my wife.
  • To have ensured that my children have finished college and graduate school and are established in their professions requires support, engagement, and love.
  • To have better relationships with old friends who are spread worldwide.

 

The 3-HAG

Having developed my BHAG, I then turned that into a 3 Year Highly Achievable Goals (3HAG) list, which is set out below.

Business

  • Generate $250k+ a year in revenue
  • Have at least 20 clients between Vistage and external coaching client

Personal

  • Be proficient enough to have a conversation in Spanish for 30 minutes with a stranger.
  • Weigh what I weighed when I graduated high school (-10lbs)
  • Fit enough to do an 11-day hike and ski five days
  • Read at least 40 books comprising, the Classics, Science, History, Biographies, and five non-fiction books.

Relationships

  • Take an annual two-week vacation with my wife, disconnecting from electronics and the outside world, and focusing on each other.
  • To talk to my children weekly about their lives and careers, spending time listening and supporting but not solving their problems. Helping them when I can and spending at least a week a year vacationing together.
  • Having spoken to my “old” friends at least once a month on the phone.

 

SMART Goals or Resolutions

I used my 3-HAG to define my goals or resolutions for 2021 and applied the SMART technique to determine them. They must be:

Specific. The goals should be clear and unambiguous, so you can focus your efforts or feel truly motivated to achieve them. By building these goals to support my BHAG and 3-HAG, I believe I have answered most of the five “W” questions:

  • What do I want to accomplish?
  • Why is this goal important?
  • Who is involved?
  • Where is it located?
  • Which resources or limits are required?

Measurable. Tying my goals to the BHAG and 3HAG, it was easy to define the measurement requirements. So once again, I have already addressed the questions for measurable goals, e.g.:

  • How much?
  • How many?
  • How will I know when it is accomplished?

Achievable. To realize my 3-HAG, the goals must also be realistic and attainable while stretching my abilities. I believe my resolutions have addressed these questions.

  • How can I accomplish this goal?
  • How realistic is the goal, based on other constraints, such as financial factors?

Relevant – Once more tying the goals to one’s BHAG and 3-HAG, I have ensured that the goals matter and align with my pertinent other goals. So I believe I can say “yes” to these questions:

  • Does this seem worthwhile?
  • Is this the right time?
  • Does this match my other efforts/needs?
  • Is it applicable in the current socio-economic environment?

Time-bound – All the goals have a target date to have a deadline to focus on and something to work toward, and answer these questions:

  • When?
  • What can I do three/six/nine months from now?
  • What can I do one/two/three/four/ weeks from now?
  • What can I do today?

Here are my goals for 2021.

Business

  • Have five coaching Clients on annual contracts
  • Have 14 Vistage Clients
  • Start every day with affirmations and planning the day’s events around the 5 x 5 framework
  • Migrate all non-value work to outside services, e.g., accounting, calendar control
  • Stick to marketing plan for:
    • Social Media
    • Blog Posts
    • Newsletters
    • Webinars

Personal

  • Walk five miles four times a week
  • Do yoga three times a week
  • Stick to new diet of limited dairy, carbs, and sugar
  • Work on Spanish 30 minutes a day and start having online conversations in Q2 once a week
  • Read/listen for an hour every day for books on my booklist

Relationships

  • Take a two-week vacation with my wife during 2021
  • Take a long weekend vacation once a quarter
  • Speak to my children once a week to support them and not solve their issues
  • Develop a calling plan for “old” friends, so they are all called through the month
  • Ensure that when I am with my wife, children, or friends, I am truly present. I have put electronics away, emptied my mind of the usual distractions, and focused on them

Of course, I have taken these and turned them into quarterly, monthly, and weekly plans, which I won’t bore you with, but they are all laid out to be tracked carefully. Also, I have already taken many steps to ensure that I get them done, starting as I want to finish. Finally, I have shared them with my family, friends, and all of you, so I have many people out there to help me and hold me accountable for getting them all done.

As a result, I have prepared a very different list of resolutions this year, but I hope that they will enable me to be the best me in the next ten years and live the life I want. Next year I will let you know if this process led to better goal achievement. However, I suggest that you try something like this with your resolutions.

Here is wishing you all a successful and happy 2021.

 

Copyright (c) Marc A. Borrelli 2021

Recent Posts

Do You Truly Know Your Core Customer?

Do You Truly Know Your Core Customer?

Knowing the profit of your core customers is key to building a growth model. Many companies have identified core customers that are generating a sub-optimal profit and so they cannot realize the profits they seek. Identifying the correct core customer allows you to generate profits and often operate in “Blue Ocean.”

The Greatest Own Goal or the Greatest Collapse

The Greatest Own Goal or the Greatest Collapse

The European Super League collapsed within days of launch due to hubris and the founder forgetting the key parts of their business model, value creation, sales, and value delivery. The collapse might bring a high price.

Does Your Financial Model Drive Growth?

Does Your Financial Model Drive Growth?

Working with many companies looking to grow, I am always surprised how many have not built a financial model that drives growth. I have mentioned before a financial model that drives growth? Here I am basing on Jim Collin's Profit/X, which he laid out in Good to...

COVID = Caught Inside

COVID = Caught Inside

As we emerge from COVID, the current employment environment makes me think of a surfing concept: “Being Caught Inside When a Big Set Comes Through.” Basically, the phrase refers to when you paddle like crazy to escape the crash of one wave, only to find that the next wave in the set is even bigger—and you’re exhausted. 2020 was the first wave, leaving us tired and low. But looking forward, there are major challenges looming on the horizon as business picks up in 2021. You are already asking a lot of your employees, who are working flat out and dealing with stress until you are able to hire more. But everyone is looking for employees right now, and hiring and retention for your organization is growing more difficult.

Why is there not MORE common sense

Why is there not MORE common sense

“Why don’t they use common sense?!” You may have said this phrase yourself, or heard it with your managers, when discussing an employee’s actions. However, the frustrated appeal to “common sense” doesn’t actually make any meaningful change in your organization. We all make decisions based on the information we have and the guides we have to use. So if the wrong decisions are being made in your organization, it’s time to examine the tools you give decision-makers.

Do You Understand Your Costs to Ensure Profitability?

Do You Understand Your Costs to Ensure Profitability?

You can only determine profitability when you know your costs. I’ve discussed before that you should price according to value, not hours. However, you still need to know your costs to understand the minimum pricing and how it is performing. Do you consider each jobs’ profitability when you price new jobs? Do you know what you should be charging to ensure you hit your profit targets? These discussions about a company’s profitability, and what measure drives profit, are critical for your organization.

Sunk Costs Are Just That, Sunk!

Sunk Costs Are Just That, Sunk!

If you were starting your business today, what would you do differently? This thought-provoking question is a valuable exercise, especially when it brings up the idea of “sunk costs” and how they limit us. A sunk cost is a payment or investment that has already been made. Since it is unrecoverable no matter what, a sunk cost shouldn’t be factored into any future decisions. However, we’re all familiar with the sunk cost fallacy: behavior driven by a past expenditure that isn’t recoupable, regardless of future actions.

Do You REALLY Know Your Business Model?

Do You REALLY Know Your Business Model?

Bringing clarity to your organization is a common theme on The Disruption! blog. Defining your business model is a worthwhile exercise for any leadership team. But how do you even begin to bring clarity into your operations? If you’re looking for a place to start, Josh Kaufman’s “Five Parts of Every Business” offers an excellent framework. Kaufman defines five parts of every business model that all flow into the next, breaking it down into Value Creation, Marketing, Sales, Value Delivery, and Finance.